parents selling house to leave early inheritances

[buttonmoon]

This is a bit of a strange situation, hence the long post, but if you manage to read though, I'd really appreciate any advice you could give:

Both my parents are retired. They have 6 adult children, all of who have moved out of the family home, bar one, the proverbial waster. He's in his early 30's, has a child and another one on the way. His girlfriend doesn't work and he doesn't really earn a great wage so while they are saving for their own house, they can't seem to save very much. They're both nice people - just not very "good with money". Personally, I think they need a good kick up the @rse., but apart from that, they're lovely people.

Anyway, since the news of the new arrival, my parents have decided that they want to sell the family home, at a knock down price, to one of my other brothers who would be able to pay the mortage on it. They approached him about it first and he said he'd like to, and would be able to, buy it. There are conditions to this sale:
a) my parents get to live out the rest of their lives there, rent free with no other lodgers (except other family members, if needs be)
b) my bro gets about 75k knocked off the value of the house (it's worth about 320k)

They then want to divide the money up between all the rest of the family i.e. everyone except my bro who is buying the house - his share is included in the knock-down price. They said that they would like to do this because:

a) they'd like to see us all with the money now, while they're alive and while we need it
b) they dont want to just leave the house to one person
c) but they do want the house to stay in the family after they go
d) the money would also be handy for them (their finances are otherwise fine, as far as I know) - they'd like to redecorate, get new furniture etc.

With the money we each get (about 28k), my bro will then have enough to get on his feet - he is applying for the affordable housing now.

So that's the situation, and here are my questions:

They are concerned that they'll have to pay captal gains or some other tax on the proceeds for the house or on the 28k gifts to us. Do you know if they will?

Most of us (bro's and sisters) are apprehensive about this, but can't exactly figure out why. We all know that my bro who is buying the house would never 'evict' my parents. The only thing I can think of is that what if one of my parents developed some strange condition and the money from the house could buy specialist care, or, what if the psychological impact of not "owning" their own home (that ole Irish trait) somehow affected their health or wellbeing... I'm grasping at straws. Can you think of reasons why this is a good or bad idea or any other thoughts about it?

 

[Brendan Burgess]

There would be no CGT on the disposal as it's the family home. The amounts are below the threshold, so there would be no CGT. Your brother would pay half the normal rate of Stamp Duty.

But, it's a bad idea and should not be proceeded with.

Your parents have psychological comfort as you point out and this is the most important.

Your brother and parents get on well now, but the relationship may well change as the parents get older. Quite a few people fall out with their kids as they age and your parents would be at your brother's mercy.

I have been told of one case where a widow in a large house sold her house to her daughter and son-in-law. There was no need to, but the couple were able to sell their own home and pay off the mortgage. They all got on well and it worked out very well. But the daughter died. The mother was now living with the son-in-law and they all continued to get on well. But in time, the son-in-law met a new woman and had no choice but to put the mother out.

If your parents need money, one of the children should consider remortgaging their own home and lending them the money. Alternatively, they could get a life loan from Bank of Ireland.

Brendan

 

[delgirl]

Hi buttonmoon,

We had exactly the same situation with my parents. We were 5 siblings and my father was adamant that the family home was to stay in the family and didn't want to think of it being sold with the proceeds split after they passed on.

My husband and I were the only ones in a position financially to buy the house and, as the matter had driven my father almost to distraction, we agreed to do so.

The property was valued by an Estate Agent, appointed by their solicitor, and the sale was handled by their solicitor.

In order to ensure their peace of mind, we asked for a charge to be placed on the title and in the contract stating that we '...agree to maintain and keep the said "parents' names" in the house on the said lands during their lives and the life of the survivor of them and permit them to have the use of said house during their lives and the life of the survivor of them'.

The above would allay any concerns you may have about your parents' rights to remain in their former home and would give them a sense of security also.

As to your parents wish to gift their children the proceeds from the sale of the family home, I would say that this is a very bad idea indeed and, unless they have very substantial savings, I would definitely not advise it.

My parents passed away last year and were both quite ill towards the end. My father was placed in a private nursing home the cost of which was very high - I think it was somewhere in the region of E500 per week. The proceeds from the sale of the house would have dissipated very quickly had he been there for a lengthy stay and had my mother also required care.

You are right to feel uneasy and should encourage your parents to do what is in their best interests only - i.e. is the main reason for their decision to sell their home solely to enable your still-at-home-brother to purchase a home for his family?

 

[RainyDay]

I know of one similar case, whereby the sale to the daughter who remained resident in the house has caused no end of tension & rows, as the remaining parent never adjusted to the fact that it was no longer their house, and the other members of the family still treated it as the parent's house rather than the siblings.

 

[huskerdu]

I agree that this can be trickyand I agree that your parents should only consider
what is the right thing for them. However, I have a few comments, on how difficult this might be for the children. One thing for the purchasing child needs to consider is
that their siblings are still likely to consider the house their family home, where they
have the right to visit any time they want to.

Also, what happens after your parents die and the sibling who owns the hosue want to
sell, to move location or buy a bigger house. they might find that their siblings think that they should be asked permission for this to happen. This is potentially a family row waiting to happen.

 

[delgirl]

One thing for the purchasing child needs to consider is
that their siblings are still likely to consider the house their family home, where they have the right to visit any time they want to.

In my case, the property was still my parents' home, even though I was the legal owner, and my sisters and brothers continued to visit as normal - there's no reason why they shouldn't have. My parents would have been devastated had their lives changed in any way and we took great care to ensure that absolutely nothing changed bar the legal paperwork.

Also, what happens after your parents die and the sibling who owns the hosue want to sell, to move location or buy a bigger house. they might find that their siblings think that they should be asked permission for this to happen.

Why would the siblings think they should be asked permission? The brother in this case is intending to purchase the family home - it's not being gifted to him, so why would the others have a say in what he decides to do with it?

 

[huskerdu]

It is my experience, that in some cases, even years down the line, the other siblings still see the house as their family home, and would be upset if it was sold.
In your case this was not a problem, but if you are embarking on something like this,
I think it is worth considering if this might be a problem in the future.
Family resentments can simmer for years.
I know a family who believe that they can visit their old family home for a weekend without being invited, or asking in advance, 20 years after their parents have died.
This must be inconvenient for the sister who lives there now with her family.

 

[buttonmoon]

Thank you all for your replies, especially you delgirl, I think your experience and advice are particularly relevant.

I'll put these scenarios to them and try to persuade them to do just what's in their own best interest, and at least think about it a bit more.

Thanks again.